Fashion fail at Woolworths knocks profits

File picture of a Woolworths store.
File picture of a Woolworths store.

The R6.9-billion impairment of Australian department store chain David Jones knocked Woolworths into a loss of R3.5-billion for its 2018 financial year‚ from a profit of R5.4-billion in the prior year‚ it reported on Thursday morning.

Headline earnings per share (HEPS) declined 17.7% to 346.3c. Woolworths cut its final dividend by 27.5% to 130.5c‚ taking its total for its 2018 financial year to R2.39‚ a 23.6% decline from the previous year’s R3.13. The retail group’s overall turnover grew 1.6% to R75bn.

Of the five divisions Woolworths segments itself into‚ food was its star performer‚ growing both sales and profit by more than 8%.

The food division contributed 43% of the group’s sales‚ but only 27% of gross profit.

What Woolworths calls its "fashion‚ beauty and home" division suffered a 1.5% decline in sales and 4% decline in gross profit.

"Our womenswear modern range failed to resonate with our core customer‚" Woolworths CEO Ian Moir said in the results statement.

"In Woolworths fashion‚ beauty and home‚ we have made a number of changes to structure‚ process and product offering to effect improvement in our womenswear ranges."

The South African clothes division contributed 20% of the group’s sales‚ placing it behind David Jones‚ which contributed 21%.

The clothes division contributed 24% of the group’s profit‚ placing it behind Australian clothing chain Country Road‚ which contributed 25% of the group’s gross profit despite only contributing 16% of sales.

"Country Road had a mixed year. Strong performances from Witchery‚ Mimco and Politix were offset by a weaker Country Road womenswear performance‚ resulting in comparable store sales declining by 1.8%‚" Moir said.

David Jones’s sales declined 3.8% to R14.5bn and its gross profit by 4.6% to R6.2bn. "In David Jones‚ the head office move to Melbourne is complete‚ as are the significant systems implementations that began last year. We now look forward to optimising those systems‚ focusing on trading the business and improving the customer experience‚" Moir said.